Curbing Heightened Speculation On Expiry Day Is Our Collective Responsibility: Sriram Krishnan, NSE

Summary

Sham Krishan, Chief Business Development Officer at the NSE, discusses the recent decision to shift expiry days for equity derivatives to Monday. The change aims to improve market efficiency and respond to geopolitical developments over weekends. Despite concerns about increased volatility and speculation, Krishan highlights that the move is part of broader market trends, with multiple exchanges altering expiry days. He suggests that consolidating expiry days across exchanges to a single day per week could reduce speculation. Krishan also emphasizes the importance of investor education to mitigate risks in options trading.

Takeaways

• 😀 NSE is changing its expiry day for equity derivatives to Monday, a decision made after considering market dynamics and geopolitical factors over the weekend.
• 😀 The move by NSE aims to optimize the expiry day for better market efficiency, based on feedback from market constituents.
• 😀 Other exchanges are also adjusting expiry days, with some launching weekly expiries, influencing the market strategy of NSE.
• 😀 The primary motivation behind the change is not to capture more market share, but to align with the broader trend in the market for expiry day changes.
• 😀 NSE has been monitoring the impact of expiry days and is open to reviewing the decision based on further feedback from market participants.
• 😀 Despite potential concerns over weekend volatility, NSE believes Monday is the best day for expiries due to the nature of geopolitical developments.
• 😀 There is a debate on whether multiple exchanges offering different expiry days could limit retail speculation, with some suggesting a unified approach for expiry days across all exchanges.
• 😀 The idea of a single expiry day for all exchanges is discussed as a potential long-term solution to address speculation concerns in the market.
• 😀 NSE is committed to investor education and awareness, recognizing the risks of options trading, especially for retail investors.
• 😀 NSE intends to continue adapting based on market feedback, ensuring that decisions are made in the best interest of investors, particularly in limiting speculative activities.

Q & A

What was the main reason behind the NSE's decision to move its expiry day to Monday?

The NSE decided to move its expiry day to Monday to take advantage of geopolitical events that happen over the weekend, believing that it would lead to more efficient market functioning.

How has the stock market reacted to the NSE's change in expiry day?

The change has caused some nervousness among competitors, such as BC, whose stock prices have been affected. However, the NSE emphasized that the decision was not driven by market share concerns but by a desire to improve market efficiency.

Did the NSE conduct any market share analysis before deciding on the expiry day change?

The NSE clarified that the rationale behind the decision was not based on market share calculations but rather on improving market efficiency and aligning with feedback from market participants.

What was the feedback from market participants regarding the NSE's decision?

The NSE has received feedback from market participants, including phone calls and emails, which are being monitored. The exchange plans to review the situation and may make further adjustments based on this feedback.

Does the Securities and Exchange Board of India (SEBI) need to approve changes in expiry days?

No, SEBI does not require prior approval for expiry day changes. However, the NSE is required to inform SEBI about the changes, which it has done.

How do other exchanges view the NSE's move, and could they follow suit by changing their expiry days?

Other exchanges, like BC, may also consider altering their expiry days in response. The NSE acknowledged that if such changes become widespread, it could lead to excessive volatility and speculations.

What is the potential issue with multiple exchanges offering different expiry days?

Having multiple exchanges offering expiry days on different days of the week could lead to an increase in speculation and market volatility, as it allows investors to trade options continuously throughout the week.

What solution does the NSE propose to mitigate speculation in the market?

The NSE proposes that all exchanges should have a unified expiry day for equity derivatives. This would limit speculation and help create a more stable market environment.

What role does investor education play in the NSE's strategy?

Investor education is crucial in the NSE's strategy to mitigate the risks associated with speculative trading. The NSE aims to help retail investors understand the risks of trading options and encourage informed investment decisions.

What is the future outlook for expiry day changes in the market according to the NSE?

The NSE suggests that while it has made a change after careful review, further changes could occur as the situation evolves, depending on market feedback and the outcomes of these decisions.